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California crisis hits wind producers

In the short term, California's electricity crisis may well bring wind projects in the state to a screeching halt until the market is fixed. Uncertainty for investors is the issue that overshadows wind development in the Golden State. That is at least in the short term, said wind energy insiders as the state staggered through its seventh consecutive day of rolling blackouts on January 22.

Complicating the picture is the financial state of the state's two main utilities, Pacific Gas & Electric (PG&E) and Southern California Edison (SCE), two of the main buyers of power in the state. As of the end of the first unprecedented week of blackouts -- and with PG&E and SCE teetering on the edge of bankruptcy -- five wind power producers who had not been paid by SCE for electricity supplied in November and December under long term green power purchase contracts said they were planning to suspend deliveries. The companies pointed out that they had been supplying power to SCE "at a fraction of the cost of out-of-state generation."

Changes to the deregulation framework to get the market to function properly, or a re-regulation of the electricity business in California, are anticipated, but it is too early to speculate about what this will mean for wind projects, particularly those just granted incentive payments under the recent auction (story page 33). "Yes I do expect a number of these projects will be built," said an insider, who then added, "Well, I can't say that. No, I don't know how much the disruption will put the plans on hold." Most experts expect the short-fall of electricity to last for a year or two.

For the American Wind Energy Association's Randy Swisher, the issue for renewables, even without the current electricity crisis, is that there is no sure market -- as there would be if a renewables portfolio standard (RPS) had been part of California's restructuring legislation. "There's nothing that provides market certainty," he says. "Our advice to California is: the auction is fine -- it's good -- but you have to have an RPS."

A huge change that will benefit wind is quite possible in the medium term. "One of the best things the state could do in its current situation is to find ways to stimulate more wind energy development," says Swisher. "Wind plants can be installed quickly and affordably, they produce no pollution or greenhouse gases, and they will help ease California's power crisis."

In mid-January, a $400 million energy purchasing plan was signed by state Governor Gray Davis. The California senate energy committee was also considering a proposal that would put the state in the electricity business for up to five years, buying power and selling it directly to consumers. Also being floated was creation of a "power czar" who would ramrod approval of new power plants through by summer, said officials in the governor's office. An RPS is being proposed by renewables advocates.

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